With some reason. The IPCC blew it back in 2007 when it claimed that the Himalayan glaciers were melting far faster than an objective reading of the data justified. What’s more, the Climategate incident (in which the contents of hacked emails made it clear that a handful of IPCC scientists viewed themselves as combatants in a war with climate change skeptics) reduced the public credibility of the organization. In broad terms, the major concern of believers (like us) is that the IPCC will fail to take proper account of new information that could affect both the pace and the ways we respond to climate change.

So it’s a relief to see the very balanced report by the multinational blue-ribbon InterAcademy Council outlining ways to insure that the IPCC remain a flexible, objective source on climate change issues. Among the key recommendations:

• regular turnover in leadership
• more power for report referees
• transparency in how the IPCC makes predictions

OK, we know: this governance stuff is a snooze. But the IPCC is just too important – and too fat a target for well funded climate change deniers – to be allowed to become a vassal of true believers.

As crops go in America, sugar isn’t very important. Unlike grains, the US can’t export sugar: production costs are far lower in tropical countries with cheaper labor – think Brazil, India, China, Thailand, Indonesia, the Caribbean. But the domestic industry is expert at the care and feeding of Congress, and has managed to hang on to import quotas that keep the domestic price far above the world price. In the process, it has priced itself out of the giant domestic market for drink sweeteners, where high fructose syrup from corn now reigns supreme. Ironically, though, the rise of corn sweeteners has proved a serendipity for domestic sugar, since growers can now count on the support of the corn lobby in their endless battle to keep sugar prices high.

So, how much does it really matter that a package of Chips Ahoy! costs an extra dime or so? More than you might expect. First, half the domestic sugar cane is grown in economically fragile south Florida, where fertilizer runoffs are not-so-slowly destroying the Everglades. Second, the quota (along with the European Union’s even tougher protectionist policies for sugar beets) deprives poor-country producers of billions in export revenues. Arguably worse, it has become a symbol of rich countries’ unwillingness to open agriculture to global competition – and, as such, a great excuse for Third World countries to resist open trade in services and to turn a blind eye to the theft of intellectual property from abroad.

Now it appears to be Google’s turn in regulators’ klieg lights. Google, you probably don’t remember, epitomized the New Age company, adopting “Do No Evil” as its mantra and plunging into visionary enterprises including the preservation of every book ever published in digital form. But Google’s current dominance of some information technology niches (and the undisguised ambition to its reach) has made the company a prime target for antitrust authorities around the world.

Google managed to convince U.S. trustbusters to bless its purchases of DoubleClick (digital marketing technology) and AdMob (mobile advertising) – though it was apparently a close call. And the company still faces complaints about its dominance of web-based advertising in Europe, whose competition authority way too casually equates market share to monopoly.

Antitrust scrutiny is often called for, particularly when large firms acquire others in related fields. But scrutiny for the right reasons. Regulators need to recognize that in markets driven by rapidly changing technology and huge economies of scale, it’s natural for one firm or another to be king of the hill – albeit temporarily. So market share alone is no indicator of anticompetitive behavior or of the difficulty a newcomer with a better idea would have in competing for the business.

This tendency toward winner-take-all market outcomes explains why Google is following the explosive growth of Facebook with interest — and, we suspect apprehension. The number of Facebook users exceeds half a billion, and Google has already fallen flat with an attempt to use its highly successful web-based e-mail technology to counter the juggernaut.

So will Facebook, with its massive lead in social networking, bury Google? Probably not. After all, successful competition in a variety of market niches left Microsoft standing (and profitable). But, if Google fails to slow Facebook’s relentless growth in social networking, the search behemoth might find itself struggling in a lot of arenas it now dominates – notably online advertising.

Neither Google nor Facebook will last forever (or even necessarily a long time). Very little related to the Internet manages to survive the Next Big Thing – even companies whose names become verbs. Whether the winners du jour make it or not, though, what ought to matter from the competition regulators’ perspective is whether their behavior is aimed at preserving market power and stifling innovation. The short but eventful history of digital technology suggests that consumers will be better off if these behemoths are given the benefit of a doubt.

Gerry Faulhaber, Professor Emeritus of Business and Public Policy at the Wharton School, gives it a try. In “Mobile Telephony: Economic and Social Impact,” [Download Here] he argues that cell phones have become the dominant information technology, surpassing even the Internet in importance in daily life. There are 4.1 billion active mobile subscriptions worldwide – an astonishing 61 handsets for every 100 people on the planet.

Arguably the biggest unknown is how the technology is affecting the growth and distribution of global output. And here, Faulhaber is a technological optimist, noting that cell phone networks have sharply improved the efficiency of markets (especially in less developed countries) by increasing the effective size of markets and reducing information and transaction costs. Cell phones now do yeoman duty in isolated towns from India to Brazil, effectively breaking the monopolies of local suppliers and opening urban markets to local producers.

Quantifying the impact on economic growth – aggregating the impact of myriad small changes – is, of course, difficult. One 2005 study (see pages 10-23) by Leonard Waverman, Meloria Meschi, and Melvyn Fuss found that an additional 10 handsets per 100 people in low-income countries raises the pace of GDP growth by half a percentage point annually. In developed countries, where substitutes for hand-held communications are more readily available, adding 10 phones per 1,000 people raises the rate of GDP growth by a quarter of a percentage point. These are humongous numbers when one remembers that a mere 2 percent annual growth rate would increase GDP seven-fold in a century.

It’s a grim world out there in so many ways. But the combination of digital technology and the exponential impact of networks has a way of making optimists of us all.

[Written with a lot of help from Jill Scherer]

For the first time, companies with very different interests have found common ground on basic principles for regulating Internet access. But the limited nature of the accord only underscores the remaining differences between the two titans on the issue of prioritizing traffic.

Start with the good news. Verizon and Google agreed that wireless network operators should be permitted to manage traffic more or less as they see fit. Score one for the telcos – and, in our view, consumers, too.

They also agreed that Internet users should be allowed to send and receive lawful content and services, run lawful apps, and connect the devices of their choice to the Internet as long as they don’t harm the network. That’s just established business practice – chicken soup for the speechwriters. It can’t hurt, though, to dish up another bowl.

But they didn’t make much headway on the nettlesome issue of whether networks should be allowed to charge more for better service. Verizon wants the option. And so do we, because it is in the interest of consumers to give the broadband providers strong incentives to invest in next-generation technology. Google offers some wiggle room here – but not much.

The joint statement says that “Prioritization of Internet traffic would be presumed inconsistent with the non-discrimination standard, but the presumption could be rebutted.” We think (and Hahn, Litan and Singer’s research has concluded [Download Here]) that this is probably too high an economic hurdle. Why, for example, assume that paying more for better service is probably bad for consumers? Nobody questions the logic of letting United Airlines charge more to ride in the front of the plane.

On the positive side, the proposal does recognize the logic of allowing network managers to prioritize different kinds of Internet traffic – say, to ensure adequate download speeds for streaming high-definition video. It also allows for additional, differentiated services that can’t exist without priority access. So, maybe life-and-death activities like remote robotic surgery do have a future on the Internet, after all.

It’s nice to see that Verizon and Google are talking turkey. But there’s no getting past the reality that they are far from finding common ground on the core issues.

One problem that has been solved is how to auction related commodities, like swaths of electromagnetic spectrum. Different swaths frequently have different values and the values are interrelated. A series of separate auctions would be inefficient because bidders can typically exercise more market power in separate auctions. Furthermore, the amount they demand of one auctioned good will typically be affected by the price of others. The trick, it would appear, is to auction the goods together in a way that allows the bidders to get the bundles of goods they most want.

Paul Milgrom and Robert Wilson of Stanford, along with Preston McAfee of Yahoo! came up with a “simultaneous ascending auction” that appears to work quite well for selling such bundles. Buyers are allowed to bid on parcels of their own design until the markets clear.

But there are defects to this approach. First, the resulting auctions are vulnerable to collusion by the bidders. Second, the auctioneer has to decide exactly how much she wants to sell before she knows the prices the objects will sell for. Third, and crucially, these auctions may take numerous rounds, and in some markets – for example, liquid financial assets – values can change dramatically in the space of minutes.

Paul Klemperer of Oxford, for his part, has come up with remedies for these defects of the multi-period auction while preserving its most attractive features. The Bank of England asked him for a design that would allow it to auction loans linked to varying qualities of collateral – and to manage the process in a very short time-frame. The goal: to be able to inject liquidity into the banking system very rapidly, but in a manner that channeled resources to those who valued them most.

Klemperer’s approach, which has already been successfully used by the Bank, could have important applications elsewhere; electricity markets come to mind.

Auction theory, like a lot of economic theory, has often amounted to a dazzling display of intellectual creativity to no practical end. Klemperer and company are showing that the payoff is just around the corner.

That’s not all bad. Most people welcome (within reason) ads for stuff they really want, and the primary goal of the Web trackers is to figure out what that might be. If you’ve been comparing hotels in Paris, you’d probably like to know that Air France is running a sale on business class seats. By the same token, if you’re a 30-year-old male, you’d probably prefer just not to hear about the latest developments in tampons. On the other side of the ledger, though, there’s plenty of information that everybody wants to keep private – for example, the medications they buy.

There are ways to address this problem (see paper by Hahn and Layne-Farrar [Download Here]), though none seems completely satisfactory. One is to set up a formal “opt-in” procedure that requires snoopers to get permission before they snoop. Ideally, this would involve a standard-form agreement that spelled out the sorts of information that were off-limits.

But make no mistake: There would be a price to regulation. First, it might not work well – when was the last time you read the contract that pops up whenever you download software? Second, whatever rules were adopted, there would surely be ambiguities that kept an army of lawyers well fed. Third, the biggest potential abusers of consumer privacy could evade the regulations by moving offshore. And last but not least, in the process of policing the snoopers, the regulators would become snoopers themselves.

One potential alternative: Use the threat of government regulation as an incentive for self-regulation. Our guess is that Google, Yahoo!, Microsoft, et al. could do a better job at setting industry standards both consumers and advertisers could live with. Anyway, it would be worth a shot.

The explanation, offered by James Surowiecki in the New Yorker, is right on the mark: In the American political system, a highly focused, well-funded lobby with tight connections in every House district is almost unbeatable when it chooses to play rough. And since this particular political game is over, we won’t rehash arguments about whether the proposed curbs on their behavior would have made sense. But their surprising (to some) escape from federal oversight does offer a nice excuse to remind readers that auto dealers aren’t always against regulation. Indeed, it is hard to think of an industry that depends so heavily on government protection from the cruel realities of the free market for their daily bread, not to mention their vacation homes in Florida.

The protection in question is auto dealer franchising laws, which vary a bit from state to state, but are generally the very model of what government ought not to do. Starting in the 1930s, car dealers organized to get Congress to, in effect, set minimum standards of treatment in their franchise agreements. As Jessica Higashiyama, who recently received her JD from UC San Francisco’s Hastings Law School, recounts, Congress was happy to oblige, but the federal courts were less receptive to the idea that Detroit had duties to franchisees beyond those spelled out in the contracts that both parties had voluntarily signed. So the dealers turned to state legislatures and managed to get some remarkable deals from many of them.

Pretty much all the auto franchise laws give dealers immense bargaining power in obtaining compensation if a car maker chooses to stop selling a model line (think Pontiac) or to stop selling cars entirely though a particular dealer. Indeed, GM and Chrysler had to back away from tough dealer-streamlining plans in bankruptcy because the process was too expensive. Some states make it illegal to sell cars at lower prices to high-volume dealers than to low-volume franchisees. Some prohibit car companies from selling directly to the public (say, via the Internet) because it would adversely affect the competitive position of the dealers. And a number are even considering laws requiring the automakers to compensate dealers for warranty repairs at the dealers’ bloated retail repair rates.

Is there ever a good economic case to be made for government intervention in a franchise relationship beyond the protections afforded by contract, fraud and antitrust laws? Consider it a challenge, dear readers, to think of one. What we are pretty sure of, though, is that car dealers’ friends in state legislatures won’t be waiting around for the law-and-economics types to debate the matter.

Some consumers have long complained about Apple’s practice of locking iPhones so that they could only work on AT&T’s network, and Apple’s practice of deciding what applications could and could not be installed on the phone. They argue that the arrangement minimizes competition and limits their choices. But, as Bob Hahn and Hal Singer documented in a study published last fall [Download Here], the exclusivity agreement has likely spurred others to accelerate their own innovations and provided consumers with a wide range of smartphone alternatives, some of which are arguably superior to the iPhone.

If we’ve learned anything from the technology marketplace of recent years–change happens overnight and apparent dominance ends fast. Or, perhaps you’ve forgotten that AOL once seemed to have an iron grip on Internet access, Microsoft was the favorite target of antitrust zealots, Google was once just a mathematical expression, and Apple was a struggling afterthought in a computer market dominated by the Wintel partnership.

As Hahn and Singer wrote in September 2009: “Although casual observers have often claimed that a particular innovation was here to stay, they commonly are proven wrong by unforeseen developments in this fast-changing marketplace. We argue that exclusive agreements can play an important role in helping to ensure that another must-have device will soon come along that will supplant the iPhone, and generate large benefits for consumers.”

And, from personal experience in the U.K. where the iPhone is sold by multiple carriers, we can tell you that having a choice in carriers does not deliver iPhone nirvana. There is something of an iPhone price war that makes the phone more affordable, but the user experience once you own the phone is not all that rosy. Reception is quite spotty in the countryside when traveling on trains, and dropped calls from London to Manchester are the rule rather than the exception. And that’s with a provider that’s reputed to have a very good network.

Still, our personal experience is not the key issue. What counts for decision makers is the relative benefits and costs of exclusive agreements. The primary benefits of banning an exclusive iPhone-type agreement would be greater price and non-price competition in the mobile device market. But competition in this market is already intense. From BlackBerry to Droid, new smartphones are coming out all the time. Even Google has produced its own branded phone. Are consumers better off with identical iPhones from every carrier or from a wide variety of smartphone models competing to distinguish themselves with an expanding array of capabilities, applications and designs?

Barring exclusive agreements carries significant costs. Carriers would have weaker incentives to aggressively promote new devices and ensure network quality. They would also have fewer incentives to innovate, such as developing new and better networks, like the “4G” networks that are coming online now to handle exploding data demands by consumers and businesses.

The real question for policymakers and the courts is the underlying structure of the market and whether a dominant player forecloses competitive choice or new entrants. In the smart phone market, it is hardly the case that the iPhone is dominant. Apple is a major player, but Research in Motion (BlackBerry) and Nokia outsell it. A long view of this market shows that competitors have risen and fallen over time–exactly what one would expect in a market that is changing rapidly. And the available choices are enough to make your head spin.

The mobile device marketplace in the U.S. is remarkably robust. That dynamism makes it easy for regulators to pick the right economic policy: namely, a light-touch regulatory approach that allows device makers and networks to innovate. Consumers will be better off if the courts appreciate the fundamental economics of the market and follow regulators’ lead. If they want continued innovation and expanding choices, this class action against Apple and AT&T is one that consumers should pray that they lose.

(This blog post was published earlier on Forbes.com.)

The EPI measures the number of jobs that would be lost from increased competition from Korean firms and subtracts the number to be gained through greater access to Korean markets. They get some nasty numbers – a net 159,000 jobs lost, as compared to no change in an estimate by the U.S. International Trade Commission (an establishmentarian, if not exactly anti-labor, source).

This difference hardly comes as a shock. Such calculations are more art than science. And for many years, centrist Democrats and many conservatives have succumbed to the temptation of defending open trade in terms of job creation. Think of NAFTA, and the wild enthusiasm of the Clintonites versus the giant-sucking-sound scenarios of protectionists.

But as economists, we’ve always found this debate a misunderstanding at best, and flat-out sophistry at worst. Almost everybody who bothered to stay awake in Econ 101 knows that, in the medium to long term, the total number of jobs is largely determined by macroeconomic factors – a mix of fiscal and monetary policy leavened by imponderables like savings rates. Trade is worthwhile because it increases total income indirectly by increasing the efficiency of production (classic “static” gains from trade) and, more importantly, by encouraging innovation through greater competition. There can be exceptions; indeed, a zillion PhD candidates have made their bones by dreaming up new ones. But, in the end, it’s a big stretch to make a broad case for messing around with using trade policy as a means of increasing jobs.

What trade undeniably does, though, is to create jobs for some and destroy jobs for others. Take the standard example of competition from the Japanese auto industry, which has surely led to better, cheaper cars. That makes most of us winners. But not the United Auto Workers and their families (or the city of Detroit), who would have been be better off if American trade policy had been used to strangle Toyota, Honda and Nissan in their cribs. The hope – and not a very realistic one – is that the losers will quickly and painlessly find attractive niches in the new order of things.

So what’s our point? Arguments about regulatory policy are almost always cast in terms of efficiency, but nobody except policy wonks really buys them. That’s one reason the White House made a modest effort to pass off the accord as good for American workers, when apparently the real reason was to come to the aid of embattled political allies in Korea – and maybe even to earn a few points with the free market wonks.